Tribunal Upholds ArcelorMittal's Eligibility, Ensures Fair Creditor Treatment

The Tribunal upheld ArcelorMittal India Pvt. Ltd.'s eligibility as a Resolution Applicant, citing the principle of res judicata. It deemed the proposed distribution by the Committee of Creditors discriminatory and modified it to ensure equitable treatment of creditors. The Tribunal emphasized the CoC's limited role in assessing Resolution Plans and prohibited delegation of authority. It ruled that profits generated during the insolvency process should be distributed among all creditors pro-rata. Disputed claims can be pursued post-moratorium under Section 60(6) of the I&B Code. The judgment underscores fair creditor treatment and Resolution Applicant's responsibility for asset distribution.

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Issues Involved:
1. Eligibility of ArcelorMittal India Pvt. Ltd. as a Resolution Applicant.
2. Distribution of assets among Financial Creditors and Operational Creditors.
3. Role and authority of the Committee of Creditors (CoC) in the distribution of assets.
4. Profit generated during the Corporate Insolvency Resolution Process (CIRP).
5. Disputed claims and remedies.

Detailed Analysis:

1. Eligibility of ArcelorMittal India Pvt. Ltd. as a Resolution Applicant:
The promoter of Essar Steel India Limited challenged the eligibility of ArcelorMittal India Pvt. Ltd. under Section 29A of the Insolvency and Bankruptcy Code, 2016 (I&B Code). The contention was that ArcelorMittal India Pvt. Ltd. was ineligible due to its association with certain companies. However, the Appellate Tribunal found that the issue of eligibility had already been settled by the Hon’ble Supreme Court and could not be re-agitated. The Tribunal held that any attempt to reopen the issue would amount to a review or reconsideration of the Supreme Court's order, which is barred by the principles of res judicata.

2. Distribution of Assets Among Financial Creditors and Operational Creditors:
The Tribunal found that the distribution proposed by the Committee of Creditors (CoC) was discriminatory. The Financial Creditors were categorized into four groups: Secured Financial Creditors with charge on project assets, Secured Financial Creditors without charge on project assets, Unsecured Financial Creditors with claims less than Rs. 10,00,000, and Unsecured Financial Creditors with claims equal to or above Rs. 10,00,000. The Operational Creditors were also categorized, and those with claims less than Rs. 1 crore were paid 100%, while others were proposed to receive nothing.

The Tribunal held that the CoC has no authority to decide the manner of distribution among creditors. The distribution must be proposed by the Resolution Applicant in the Resolution Plan and should be non-discriminatory. The Tribunal modified the distribution plan to ensure equitable treatment of similarly situated creditors.

3. Role and Authority of the Committee of Creditors (CoC):
The Tribunal emphasized that the CoC's role is limited to assessing the viability and feasibility of the Resolution Plan and ensuring compliance with the I&B Code and regulations. The CoC cannot delegate its authority to a Sub-Committee or Core Committee for negotiating with the Resolution Applicant. Any such delegation and the resulting decisions are against the provisions of the I&B Code.

4. Profit Generated During the Corporate Insolvency Resolution Process (CIRP):
The Tribunal addressed the issue of profit generated during the CIRP, which was approximately Rs. 3,495 crores. It held that this profit should not be given to the Successful Resolution Applicant, as they had not invested any money during the CIRP. Instead, the profit should be distributed among all creditors, both Financial and Operational, on a pro-rata basis of their claims, subject to the admitted claim amounts.

5. Disputed Claims and Remedies:
The Tribunal clarified that disputed claims unresolved during the CIRP could be pursued under Section 60(6) of the I&B Code after the moratorium period ends. This provision allows creditors to file suits or applications against the Corporate Debtor for disputed claims. The Tribunal also noted that the Resolution Professional has no jurisdiction to decide the claims of creditors; their role is limited to collating claims.

Conclusion:
The Tribunal modified the Resolution Plan to ensure equitable treatment of all creditors, emphasizing that the distribution of assets must be proposed by the Resolution Applicant and not decided by the CoC. It also directed that profits generated during the CIRP be distributed among creditors and clarified the remedies available for disputed claims. The judgment highlights the importance of non-discriminatory treatment of creditors and the limited role of the CoC in the distribution of assets.

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